Family members often look for assistance when trying to care for their loved ones at home. Hiring a caregiver is a practical option. However, a recent court case emphasizes the need for caution when Medicaid applicants hire caregivers. In the case of Jenson v. Department of Human Services, a Michigan appeals court ruled payments to a caregiver subjected the Medicaid applicant to a penalty period. How could a personal choice about health care affect Medicaid benefits?
Details of the Case
The case involved the care of Betty Jensen, a dementia patient. Her son, Jason Jensen, determined that she could benefit from the help of a caregiver. He hired a non-relative, paying her $19,000 over many months. However, the Jensen’s did not sign a formal agreement with the caregiver nor did they get a direct order from a doctor recommending the service. When Ms. Jensen’s condition worsened, she was admitted into a nursing home and applied for Medicaid to cover the costs. However, the state said her coverage would not be applied until after a penalty period because the money paid to the caregiver was considered a divestment, or unlawful transfer because it was not a formal, contracted arrangement. Sadly, Ms. Jensen passed away before this penalty period was up.
At first, a trial court sided with the Jensen’s, reasoning that contracts were only required when the caregiver was a relative. However, when the state appealed, the Michigan Court of Appeals reversed the decision and said the penalty period was appropriate in this case. Their decision hinged on the regulation that says payments to caregivers are considered divestments, unless there is a signed contract and a recommendation from a doctor.
What is a divestment? Generally speaking, it’s the opposite of an investment. Companies or individuals that take action to reduce assets are considered divesting. In the business world, companies may do this just before selling to another firm to lower their net worth. As far as Medicaid is concerned, individuals that dispose of their assets for an amount that was less than fair market value are considered divesting and are subject to a penalty period when Medicaid benefits will be withheld. Medicaid has the right to look through financial transactions for the previous five years to determine if the penalty period is applicable. How long is the penalty period? It depends on the amount of the assets divested, and there is no limit to the penalty period. For example, Ms. Jensen paid her caregiver $19,000. The amount of Medicaid that will be withheld is the average amount that would be paid for a monthly private-pay rate at the nursing home. If the nursing home costs $3,000 per month, the penalty period would be about six and a half months ($19,000/$3000).
Regulations do not bend for personal circumstances. The state court admitted, “If we were not bound by the plain language of [the regulations], and were we permitted de novo review of the lower tribunals’ factual considerations, we would reach quite a different result.” The judge did not think Mr. Jensen hired the caregiver unnecessarily or overpaid for the services. They were legitimately needed. However, they are bound to uphold state law.
The biggest lesson here is that elder care requires strategy and planning. In order for your loved ones to receive the Medicaid benefits they deserve and protect their hard-earned assets, family members need to know the laws and regulations in their state. Being caught off guard may result in patients having to absorb large out-of-pocket costs. The Elder Care Firm specializes in helping families plan for the best quality of life for their loved ones. Consult one of our attorneys to discuss how to qualify for Medicaid benefits and how best to protect your family’s assets. Contact us for a consultation.
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